Forecast for 'one L of a recovery'

The business organisation said the recovery is likely to be characterised by a weak upward gradient, with quarters of acceleration, deceleration and even decline.

Graeme Leach, chief economist, said: "After a very abnormal recession it would be foolish to rule out the possibility of a very abnormal recovery as well.

"A whole host of reasons support the idea of one L of a recovery.

"One of the key reasons behind this forecast is the potential for further de-leveraging in the household sector and an upward movement in the savings ratio.

"The savings ratio has increased significantly but it is still well short of the level attained in the wake of previous recessions."

Other factors in support of an L-shaped recovery include a weakening in house prices, the lack of a significant bounce in consumer and business confidence, and working capital for corporate expansion being hard to obtain.

The IoD said the prevailing economic uncertainty means that a double-dip or triple tumble recession cannot be ruled out.

On the plus side, the so-called square root cycle – above trend growth triggering interest rate rises – remains a possibility.